Practicing Success
What kind of company has its members' liability arising only in the event of winding up? |
Company limited by guarantee Private company Public company Unlimited company |
Company limited by guarantee |
A "company limited by guarantee" is the type of company where the liability of its members is limited to the amount they agree to contribute in the event that the company is wound up. In other words, the members of such a company undertake to contribute a predetermined amount (often nominal) towards the company's debts and obligations if the company goes into liquidation or winding up. In the event that the company faces financial difficulties leading to winding up, the members' liability is triggered, and they contribute the guaranteed amounts to help settle the company's debts. Unlike companies limited by shares, where the liability of shareholders is generally limited to the amount unpaid on their shares, companies limited by guarantee have liability triggered specifically upon winding up. |